A closed-loop supply chain is a system where materials and products flow in a circular pattern back to the original manufacturer for reprocessing. This type of supply chain is beneficial for companies because it allows them to recapture value from products and materials that would otherwise be lost. In addition, closed-loop supply chains are more sustainable than traditional linear supply chains because they minimize waste and protect the environment.
Closed-Loop Supply Chains in Detail
The concept of a closed-loop supply chain was first developed by Walter Stahel in the 1970s. Stahel, a Swiss economist, argued that our society was too focused on linear production models where materials are extracted, used to create products, and then discarded. He believed that this linear model was not sustainable in the long term because it would eventually lead to the depletion of our natural resources.
Stahel instead proposed a shift to a circular economy, where materials and products are used over and over again. This would allow us to keep materials in use for longer periods of time, which would minimize waste and maximize resource efficiency. The closed-loop supply chain is one way to achieve a circular economy.
In a closed-loop supply chain, materials and products flow in a continuous loop back to the original manufacturer. For example, a furniture company may use wood from sustainably managed forests to create chairs. Once the chairs are no longer needed, they are returned to the furniture company, where they are dismantled, and the wood is reused to create new chairs.
Or, if you’re part of the manufacturing industry, maybe you can use systems focusing on metal process control with AI to maximize efficiency.
This type of supply chain is beneficial for companies because it allows them to recapture value from products and materials that would otherwise be lost. In addition, closed-loop supply chains are more sustainable than traditional linear supply chains because they minimize waste and protect the environment.
Challenges
A closed-loop supply chain is not without its challenges, however. One challenge is that it can be difficult to find buyers for products at the end of their lifecycle. For example, a furniture company may have trouble selling used chairs that are in poor condition. In addition, setting up a closed-loop supply chain can be costly and time-consuming.
Despite these challenges, closed-loop supply chains are becoming increasingly popular as companies look for ways to reduce waste and become more sustainable. In fact, some companies are beginning to see the closed-loop supply chain as a competitive advantage.
The Benefits of Closed-Loop Supply Chains In Detail
The benefits of a closed-loop supply chain are many and varied but can be summarised as follows:
Increased Efficiency
A closed-loop supply chain is a much more efficient way of managing resources and materials, as it eliminates waste and reduces the need for new raw materials. This, in turn, leads to reduced costs and improved competitiveness.
Improved Quality
By recycling materials and components within the supply chain, the quality of products and services can be improved as well as consistency and reliability increased. This helps to build customer trust and confidence in a company’s brand.
Sustainability
A closed-loop supply chain is a more sustainable way of doing business, as it minimizes the impact on the environment. This is becoming increasingly important as consumers and businesses alike are looking for ways to reduce their ‘carbon footprint’.
Enhanced Reputation
As well as the environmental benefits, a company with a closed-loop supply chain can also enhance its reputation by being seen to be a responsible and sustainable business. This can lead to improved customer loyalty and new business opportunities.
Improved CSR
Corporate social responsibility is an important consideration for many businesses, and a closed-loop supply chain can help to improve a company’s CSR credentials. This is because it demonstrates a commitment to minimizing environmental impact and maximizing resource efficiency.
Future-Proofing
As sustainability becomes increasingly important, those businesses with closed-loop supply chains will be in a stronger position to weather any future regulation or consumer trends. This future-proofing can give a company a significant competitive advantage.
Increased Customer Engagement
By being open and transparent about your closed-loop supply chain, you can engage more with your customers and build trust and confidence in your brand. This increased engagement can lead to improved customer retention and loyalty.
Employee Engagement
A closed-loop supply chain can also help to engage and motivate employees, as they can see the positive impact that their work is having on the environment. This can lead to improved employee productivity and satisfaction.
Risk Reduction
A closed-loop supply chain can help to reduce the risks associated with traditional linear supply chains, as it minimizes the reliance on external factors such as raw materials availability and oil prices. This helps to improve business continuity and resilience.
Improved Communications
By having a closed-loop supply chain, you can improve communication and coordination between different parts of the organization, as well as with suppliers and customers. This can lead to a more efficient and effective business operation.
Real World Practical Examples of Closed-Loop Supply Chains
Now that you have a clear view of what these systems are, it’s time to see real-world examples of them in action.
Coca-Cola’s closed-loop supply chain
In order to create a closed-loop supply chain for its products, Coca-Cola has invested heavily in recycling infrastructure and technology. The company has also worked to engage its consumers in recycling initiatives, such as the “Live Positively” campaign. As a result of these efforts, Coca-Cola was able to recycle nearly 80% of the PET bottles used for its products in Europe in 2013.
Frito-Lay’s SunChips brand
Frito-Lay’s SunChip brand has implemented a number of sustainability initiatives throughout its supply chain. These include using recycled materials in its packaging, solar power to run some of its manufacturing facilities, and investing in energy-efficient equipment. As a result of these efforts, the SunChips brand has been able to reduce its carbon footprint by 21% since 2007.
Ford’s use of recycled materials
Ford Motor Company has long been a leader in the use of recycled materials in its vehicles. The company was one of the first to use recycled plastic in its cars and trucks, and it now uses recycled materials in more than 30 different applications. Ford’s commitment to using recycled materials helps to close the loop on its supply chain and reduces the environmental impact of its products.
Johnson & Johnson’s use of post-consumer waste
Johnson & Johnson is another company that is working to close the loop on its supply chain. The company has been using post-consumer waste (PCW) in its products for more than 25 years. Johnson & Johnson’s use of PCW helps to reduce the environmental impact of its products and keeps valuable resources from being landfilled or incinerated.
Nike’s Flyknit technology
Nike’s Flyknit technology is another example of how a company can close the loop on its supply chain. Nike’s Flyknit shoes are made from recycled plastic bottles, and the company has committed to using 100% recycled polyester in all of its products by 2020. Nike’s use of recycled materials helps to reduce the environmental impact of its products and keeps valuable resources from being landfilled or incinerated.
Patagonia’s commitment to sustainable sourcing
Patagonia is a leader in sustainable sourcing, and the company has committed to using only certified organic cotton in all of its products by 2020. Patagonia’s commitment to sustainable sourcing helps to close the loop on its supply chain and reduces the environmental impact of its products.
Conclusion
As you can see, there are a number of ways that companies can close the loop on their supply chains. By using recycled materials, investing in renewable energy, and engaging in other sustainable practices, companies can reduce their environmental impact and create a more efficient and effective business operation.
Author bio
Rick Seidl is a digital marketing specialist with a bachelor’s degree in Digital Media and communications, based in Portland, Oregon. He carries a burning passion for digital marketing, social media, small business development, and establishing its presence in a digital world, and is currently quenching his thirst through writing about digital marketing and business strategies for Find Digital Agency.
